When British football manager Ian Dowie coined the term ‘bouncebackability’ in 2004 to describe the resilience of his Crystal Palace side after conceding too many goals – shortly before the club were relegated from the Premier League – I doubt he foresaw its resonance for the banking world in 2014.
But I believe banks will also be in long-term trouble if they take such a narrow view of business resilience, satisfying themselves simply with the knowledge they can respond strongly to a crisis.
In today’s world, real business resilience requires a proactive and preventative approach, led right from the top of the business, to grapple with an issue before it emerges.
What is driving this change? I believe there are three underlying shifts in the reality financial institutions face today that are transforming how banks must think about resilience.
- Banks face far greater transparency on any customer impact. In the past, an offline ATM or shuttered bank branch was hardly likely to prompt much of a visible impact. But today, when a bank’s online systems or app goes down, there is an immediate and tangible response, fuelled by social media. When every customer has an instant, global broadcasting platform, the impact of any failures has a potentially huge ripple effect.
- Banking services are now seen as a utility. Banking today is more like a 24x7 service for consumers, just like their electricity or internet access. If you feel like paying your bills at 1am, you should be able to do so – just as you’d expect the water and lights to turn on then. Unfortunately, however, few banks are yet truly set up to run this way. Many still rely on legacy systems designed for standard office hours to support branch banking. In today’s digital era, those times are over.
- Banking regulators have now grown teeth. In the past, the issue of resilience rarely involved any regulatory risk for banks. There was little consistency of rules across differing jurisdictions, and penalties were rare. This is changing: regulators are now much more vigilant, more demanding, and more capable of assessing an organization’s ability to meet those requirements.
These shifts underline the importance of banks rethinking their culture in relation to resilience. While of course, no bank would ever admit to not having a proactive approach to resilience, they are under huge pressure to deliver their services more cost effectively, which in turn results in corners being cut.
Many bank chiefs have admitted to having underinvested in their systems for years, while failing to properly consolidate multiple overlapping systems after prior mergers and acquisitions
Now is the time to get senior executives engaged in building a simpler, more resilient business for a digital world. Only then will banks avoid the disastrous reputational damage caused by major systems outages, in an era when people no longer find this acceptable.